Kross Ltd — Q1 FY26 earnings call

Call held 11 Aug 2025

Management summary

Kross Ltd reported a resilient Q1 FY26, with Profit After Tax growing 40% to ₹10.7 crores and PAT margins expanding to 7.7%, despite a 5% decline in revenue to ₹139.4 crores due to a cyclical slowdown in the CV segment. The company's diversified model and strategic investments from IPO proceeds, including new extrusion lines and seamless tube facilities, are positioning it for future growth. Management expects H2 FY26 to be significantly better than H1, with overall top-line growth of 10-12% for FY26.

Highlights

  • Profit After Tax (PAT) grew by 40% to ₹10.7 crores in Q1 FY26, up from ₹7.7 crores in Q1 FY25.

  • PAT margin improved by 245 basis points to 7.7% in Q1 FY26, from 5.2% in Q1 FY25.

  • EBITDA margin improved by 27 basis points to 13.6% in Q1 FY26, from 11.3% in Q1 FY25.

  • Diversified product and business models enabled effective navigation of cyclical slowdown, maintaining a healthy order book.

  • 80% of IPO proceeds have been utilized for strategic initiatives like extrusion line, seamless tube facility, and forging capacity expansion.

Concerns

  • Revenue declined by 5% to ₹139.4 crores in Q1 FY26 compared to Q1 FY25.

  • The revenue softness was primarily due to weak demand and lower sales in the Commercial Vehicle (CV) segment.

  • The trailer segment experienced a volume drop of approximately 7-8% in the industry, with Kross's sales in this segment declining by 5-6%.

Key financials

  1. Revenue ₹139.4 Cr -5%YoY
  2. EBITDA ₹16.2 Cr
  3. EBITDA Margin 13.6% +20.3%YoY
  4. PAT ₹10.7 Cr +39%YoY
  5. PAT Margin 7.7% +48.1%YoY

What they filed

Q1 FY27: revenue up 32.4%, net profit up 18.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue139 150 185 139 131 −6%177 +18%225 +22%184 +32%
EBITDA18 20 27 16 15 −17%23 +15%34 +26%23 +44%
Net profit10 14 17 11 8 −20%14 +0%22 +29%13 +18%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Trailer Axles and Suspensions
    40% Revenue Contribution
  • Other Component Business
    60% Revenue Contribution
  • Agriculture Segment
    11% Current Revenue Exposure

Capital allocation

medium confidence
  • Capex Capex disclosed from the proceeds of the IPO
    • New extrusion line for axle manufacturing capacity expansion (5,000 to 7,500 units/month)
    • Seamless tube facility construction and machinery
    • Doubling forging capabilities (2,000-tonne and 1,000-tonne screw presses commissioned, 1,600-tonne and 2,000-ton presses planned for H2 FY26)
    On the operational front, we continue to strengthen our forging capabilities. In FY '26, we doubled our forging capacities with the addition of a 2,000-tonne screw press and a 1,000-tonne screw press. Both are already commissioned. Furthermore, we plan to install a 1,600-tonne press plus a 2,000-ton press in H2 FY '26. All of this will enhance our production efficiency and capacity. Please note that all these are from the proceeds of the IPO.

Guidance & targets

Revenue

  • Overall Top Line Growth Revenue · FY26 · Medium confidence 10-12%
    So, with things better this year, at least in H2, for this year, we are looking at a 10%, 10% or 12% increase in the top line for this year.

    — Kunal Rai

  • Overall Top Line Growth Revenue · FY26 · Low confidence 15%
    No, no. It is, of course, everything is done on a yearly basis. So, 10% to 12%, let us say, hopefully for 15% even.

    — Sudhir Rai

Margin

  • EBITDA Margin Margin · FY26 · Medium confidence 14-14.5%
    If you look into our margins in the March quarter, EBITDA margins were approximately at 14% - 14.5%; PAT margins were around at 9%. So, we are looking at similar margins for this year as well.

    — Kunal Rai

  • EBITDA Margin Margin · FY26 · Medium confidence 13.5-14%
    Yes, so we were at 13.5%, it will climb to 14%, in that same bracket, 13.5% to 14%.

    — Sudhir Rai

Export

  • Export Contribution to Revenue Export · FY26 · High confidence 5%
    In our export segment, revenue contributions stood at 4% in Q1 FY 26, keeping us on track to achieve a full year export target of 5%.

    — Sudhir Rai

  • Export Contribution to Revenue Export · FY27 · Medium confidence 8-10%
    As compared to doing 1% exports in FY '24, last year we did 3.5%, we are now trying to grow to 5% - 6% and by the end of next year, grow to approximately 8% to 10% on our export

    — Kunal Rai

New Product Revenue

  • New Export Order Revenue New Product Revenue · annually in next two years (from Q2 FY27) · High confidence 40 crores
    We have also secured a new export order from a leading European Tier-1 manufacturer with a production schedule to commence in Q2 FY '27. The product lines for this customer is very similar to our existing customer and the potential of generating about Rs 40 crores revenue annually in the next two years.

    — Sudhir Rai

  • Tipping Jacks Revenue New Product Revenue · H2 FY26 · High confidence 10-12 crores
    So we are hopeful to launch our products in the month of October, and we expect on the top line this new product should be bringing Rs. 10 crores to Rs. 12 crores of added revenue for H2.

    — Sumeet Rai

  • Tipping Jacks Revenue New Product Revenue · FY27 · Medium confidence 80 crores
    With what we know about the market, in FY '27, we should be able to do a turnover of upwards of Rs. 80 crores on this product line.

    — Sumeet Rai

  • Seamless Tube Facility Revenue New Product Revenue · next two-three years · Medium confidence 600 crores
    If you multiply that by about, I think we are talking about Rs. 600 crores in the next two-three years coming in. That is using 50% for our own in-house consumption and using 50% for our sale of seamless tubes.

    — Sudhir Rai

Capacity

  • Axle Manufacturing Capacity Capacity · Q3 FY26 · High confidence 7,500 units per month

    Previously 5,000 units per month → 7,500 units per month

    It will expand our axle manufacturing capacity from 5,000 per month to 7,500 per month, reducing cost, improving product reliability, thereby strengthening our long-term competitiveness.

    — Sudhir Rai

Capacity Utilization

  • Axle Capacity Utilization Capacity Utilization · FY26 · Medium confidence 60-65%
    We are looking at a utilization of approximately 60% - 65%, not more than that.

    — Kunal Rai

Segment Mix

  • Agriculture Segment Revenue Exposure Segment Mix · next two years · High confidence 15%

    Previously 11% → 15%

    With a sharpened focus on this segment, we aim to increase our exposure to 15% of total revenue from currently 11% over the next two years.

    — Sumeet Rai

Market context

  • Export Contribution to Revenue Export · FY27 · Medium confidence double-digit
    With the above, we aim to reach a double-digit export contribution by the end of FY '27.

    — Sudhir Rai

What to watch in Q2 FY26

Tipping Jacks Product Launch

H2 FY26
Current Under development
Target Launch by end of October 2025

Why it matters

Successful launch will contribute ₹10-12 crores revenue in H2 FY26 and is a key new product line.

Regarding the new developments on the trailer front, we are getting into the business of manufacturing tipping jacks and we are going to launch our tipping jack products by the end of October 2025.

Risks & concerns

  • Cyclical slowdown in CV sector

    high

    The overall environment was challenging due to cyclical slowdown over the past 16-17 months, impacting revenue.

    Management acknowledged

  • Regulatory mandate for AC cabin in H1 FY26

    medium

    A government mandate for AC cabins in CVs led OEMs to produce non-AC vehicles in April/May, which they couldn't sell, impacting H1 sales.

    Management acknowledged

  • European market slowdown

    medium

    Europe is not doing too well, which could be a headwind for export business, though current export contribution is low.

    Management acknowledged

  • Scrappage policy not taking off

    medium

    The scrappage policy, which could boost demand, has not yet been implemented, remaining a 'true headwind'.

    Management acknowledged

  • Monsoon season impact on trailer sales

    low

    Monsoon season is typically the worst time for trailer sales, contributing to Q1 weakness.

    Management acknowledged

Q&A highlights

7 direct
CV Industry Outlook and H2 Expectations Direct
what has been indicated by leading OEMs and Tier-1 manufacturers is that H2 will be far better than H1. Now, what happened in H1 was a regulatory mandate, which the government had given for the AC cabin, okay.

Management provided a clear outlook for the CV sector, attributing H1 weakness to a regulatory mandate and expecting H2 improvement based on OEM feedback and infrastructure spending.

Asked by Mihir Vora

Trailer Market Decline and Market Share Direct
the volume drop that we see quarter of last year versus 1st Quarter of this year, that is been approximately 7% to 8%, that has been the drop year-on-year. And if you look into the entire drop which we saw in the last year, that is FY '23 versus FY '24, it was at approximately 5% to 6%.

Management clarified that while the industry trailer volume declined 7-8%, Kross's sales only declined 5-6%, indicating they did not lose market share and potentially gained some.

Asked by Sanket Kelaskar

Gross Profit Margin Improvement and Freight Cost Direct
Steel prices also in the last year have slightly softened. We have seen one decrease of steel prices of approximately Rs. 2,000 - Rs. 2,500 per tonne as well coming down per kg. So, we would be able to maintain this gross profit for the coming quarters as well.

Management attributed margin improvement to cost reduction activities and softening steel prices, indicating sustainability of these margins.

Asked by Sanket Kelaskar

Working Capital Cycle Improvement Direct
See, in terms of our working capital cycle, we do see it getting better from quarter three, hopefully. And yes, for sure, quarter four, we should be able to be at where we were in the last year.

Management provided a timeline for working capital cycle improvement, linking it to the recovery of the cyclical trailer industry.

Asked by Sanket Kelaskar

Headwinds in the Business Direct
Headwinds in the business, Europe is not doing too well right now. But in spite of that, because our exports are just 5%, we have so much growth opportunities.

Management acknowledged external headwinds like the European market slowdown but emphasized that their low export base and growth opportunities mitigate the impact.

Asked by Ajay Kale

Tag Axles and Tipping Jacks Launch and Revenue Contribution Direct
So we are hopeful to launch our products in the month of October, and we expect on the top line this new product should be bringing Rs. 10 crores to Rs. 12 crores of added revenue for H2. With what we know about the market, in FY '27, we should be able to do a turnover of upwards of Rs. 80 crores on this product line.

Management provided specific revenue guidance for new product launches (tipping jacks), indicating significant future contribution.

Asked by Ankur Poddar

Seamless Tube Facility Peak Revenue and Backward Integration Benefits Direct
I think we are talking about Rs. 600 crores in the next two-three years coming in. That is using 50% for our own in-house consumption and using 50% for our sale of seamless tubes.

Management quantified the revenue potential of the seamless tube facility and explained its dual purpose of backward integration and external sales, highlighting strategic self-reliance over just margin improvement.

Asked by Maitri

2 min read 6 chapters

Detailed narrative

Q1 FY26 Performance Overview

Kross Limited reported a 5% decline in revenue to ₹139.4 crores in Q1 FY26 compared to Q1 FY25, primarily due to weak demand in the Commercial Vehicle (CV) segment. Despite this, the company achieved a 40% growth in Profit After Tax (PAT) to ₹10.7 crores, with PAT margin improving by 245 basis points to 7.7%. EBITDA stood at ₹16.2 crores, and EBITDA margins expanded by 27 basis points to 13.6%, reflecting a focus on operational efficiency and cost control.

Strategic Initiatives and Capacity Expansion

The company's strategic initiatives are progressing, with the new extrusion line machinery delivered and commercial production expected to commence from Q3 FY26. This line will increase axle manufacturing capacity from 5,000 to 7,500 units per month. The seamless tube facility construction is on track for completion by December 2025, with production targeted for Q4 FY27, aiming for ₹600 crores in revenue over the next 2-3 years. Forging capabilities have been doubled in FY26, with further additions planned for H2 FY26, all funded by IPO proceeds.

Export and New Product Segment Growth

Kross is on track to achieve a full-year export target of 5% for FY26, with a goal to reach double-digit export contribution by FY27. A new export order from a European Tier-1 manufacturer is expected to generate ₹40 crores in annual revenue from Q2 FY27. The company is also launching new products, including tipping jacks by October 2025, projected to add ₹10-12 crores in H2 FY26 and ₹80 crores in FY27. Car carrier axles and suspensions have been launched, and a proprietary landing leg is under testing.

Agriculture Segment Focus

The agriculture segment, currently contributing 11% to total revenue, is a key growth area. Kross aims to increase its exposure to this segment to 15% of total revenue over the next two years by expanding offerings to new domestic OEMs, with production expected to begin by Q4 FY26. The company has dedicated machining facilities for both agri and CV customers, ensuring capacity for growth.

Industry Outlook and Headwinds

Management expects H2 FY26 to be significantly better than H1, citing improved government spending on infrastructure and feedback from OEMs. H1 was impacted by a regulatory mandate for AC cabins in CVs and the monsoon season affecting trailer sales. While the European market faces a slowdown, Kross's low export base (currently 5%) and new growth opportunities mitigate this risk. The non-implementation of the scrappage policy remains a headwind.

Capital Allocation and IPO Utilization

Kross has utilized 80% of its IPO proceeds, with the remaining 20% to be deployed in FY26. These investments are crucial for the next phase of growth, funding the new extrusion line, seamless tube facility, and enhanced forging capabilities. The seamless tube facility, in particular, is a strategic backward integration move to reduce reliance on imports for key components, with 50% of its capacity dedicated to in-house consumption and 50% for external sales.

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